Chamber of Commerce fights Cherriots' proposed payroll tax

ANNA REED / Statesman Journal
Cherriots buses stop at the main station in downtown Salem on Friday, March 13.
Cherriots buses stop at the main station in downtown Salem on Friday, March 13, 2015.(Photo: ANNA REED / Statesman Journal)Buy Photo

This year, Cherriots officials faced two difficult choices in how to proceed with phase two of their of their “Moving Forward” plan. Phase one was a September launch of the most dramatic changes to their bus routes in years. Phase two was going to be just as dramatic and included the following changes:

Restoring the Student Bus Pass Program. The program allowed middle and high school students to ride the bus for free during the school year. The program, funded by a state grant, was eliminated by the state in 2011.

Provide bus service on holidays except Thanksgiving, New Years and Christmas, and extend bus service operating evening hours.

The re-establishment of weekend bus service. The Saturday bus service would be brought back in summer 2016. The Sunday bus service, which would be more limited, would arrive in summer 2017.

Cherriots new routes a first day success

The question Cherriots face was where the money would come from to pay the annual $5 million cost for the proposed changes. After some deliberation, Cherriots’ officials decided upon two proposals for a possible November ballot measure.

A new five-year property tax: The tax would apply to property owners in the urban growth boundaries in either Salem or Keizer. Any property owner in those areas would pay a tax of 58 cents per $1,000 of the value of their property. This would work out to $174 annually on any property within those boundaries valued at $300,000. Cherriots would have to take the tax to the voters after five years to keep it.

Permanent employer payroll tax: The proposed tax would be 0.21 percent of the total payroll. According to the Oregon Employment Division, the median payroll in the proposed tax areas is around $80,000. Businesses with that level of payroll would pay $169 per year or a little less.

Informal polling of 300 likely voters in early spring showed the proposed property tax measure receiving only 49 percent of support, while the employer payroll tax received more than 60 percent. Cherriots decided to go ahead with a permanent employer payroll tax. The tax would exempt charitable nonprofits, except hospitals, and government agencies, as dictated by state law.

There was a problem, though. One of the most influential organizations in Marion County was steadfast in opposition: the Salem Area Chamber of Commerce. The chamber argued that the proposed tax was unfair toward business, and it vowed early this year in meetings with Cherriots officials and in public that it would fight the proposal.

And it has. The chamber, through its super PAC, has raised close to $167,000, with a goal of $250,000, to defeat the proposed tax measure in November. The biggest contribution, $50,000, comes from the region's largest private employer, Salem Hospital. Cherriots, by comparison, has raised approximately $20,000.

Receiving money from employer payroll taxes would put Cherriots in line with Eugene and Portland's transit services, which receive similar funding. Andy Vobora, director of customer services and planning for Lane Transit District, said employers pay a payroll tax of 0.7 percent, accounting for $31 million in revenue for the transit service, and it receives $1.6 million in self-employment tax revenue. Mary Fetsch, representative of Portland's TriMet, said payroll taxes account for more than 36 percent of the general fund resources for TriMet to the tune of the $312,711,818 annually.

Now, Cherriots is funded through variety of sources, including property taxes – 76 cents per $1,000 of property value – and the state, which pays 0.6 percent of payroll of the workers in the district transit service area, which amounts to $5 million a year.